How to Buy Bitcoin and Trade Bitcoin Futures

By Mr. 848days - December 17, 2017

Bitcoin has been all over the news for the better part of 2017. It has raised a lot of attention and interest worldwide. The fact that you're here, you're probably interested or at least curious about bitcoin and other cyptocurrencies. I'm not here to convince you that investing in bitcoin is right or wrong but rather provide you some insight on how to get started in buying and selling bitcoin and trading bitcoin futures.

One of the most popular and well-known cryptocurreny exchanges is Coinbase, the leading U.S. platform for buying and selling major cryptocurrencies. The company was founded in 2012 and it's based in San Francisco, California with over 10 million customers and over $50 billion dollars in traded digital currencies in over 32 countries. The Coinbase application can be downloaded in the iOS and Android App Stores. Currently, Coinbase supports Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC) with plan to support other digital currencies in the future. To help you get started, here are some screenshots:

1: Login/Sign Up Screen

2: Sign Up Screen

3: Trading Screen

Note: Prices are based on 12/17/2017 in the morning.​After signing up, Coinbase requires you to verify your identity by taking front and back pictures of your driver license. For me, it was verified in minutes. You then have the option to buy bitcoin, ethereum, and/or litecoin from your bank account or credit card. I opted for the bank account as it has lower transaction fees. Once you setup your digital wallet, you can link your wallet to your bank account which will take a couple of days. Coinbase limits on the weekly amount you can trade up to $10,000.00 in my experience. And in general, it took about a week for my trades to go from pending to cleared complete status. Recently, it seems to take only a couple of days. Coinbase will continue to improve to real-time transactions over time. Coinbase also limits on the weekly amount you can sell up to $15,000.00 in my experience.

To start buying your bitcoin, go to screenshot#4 and enter the amount you wish to buy and Coinbase will automatically correlate the amount into the equivalent share or fractional share of bitcoin traded in the open market. One of the features on the Coinbase application is the ability to setup alerts on levels (screenshot#5) you're comfortable either buying or selling bitcoin, ethereum, and litecoin. As an example on one of my recent trade before Thanksgiving, I was looking to accumulate additional bitcoin if the price should fall below $7000.00 and I got an alert for which I entered a trade as illustrated in screenshot#6. Also be mindful that due to overwhelming user demand, Coinbase systems experienced overload at times, which might prevent you from entering your trades, say at the desirable lower price. This had happened to me at least on one occasion.

Note: You can also move funds from your digital wallets to GDAX which is Coinbase's exchange platform for institution professionals to trade a variety of digital currencies. For more information, visit their website: https://www.gdax.com​

4: Buy Screen

5: Setup Alert Screen

6: Bought Screen

Bitcoin Futures

The CBOE Futures Exchange launched bitcoin futures a week ago on December 10, 2017 under the ticker symbol "XBT". Later today at 6pm Eastern Standard Time, the CME group will launch its own bitcoin futures under the ticker symbol "BTC". Future contracts give investors exposure to bitcoin without having to immediately complete the transaction. This allows the use of leverage margin. The buyer and seller of the contracts agreed on a specific price of the bitcoin on a future date. You can buy and sell future contracts with your existing future account with your brokerage. With CBOE bitcoin futures, the margin requirement is 44% of the actual bitcoin spot price and each contract is the equivalent of 1 bitcoin. Note that with CME bitcoin futures, each contract is equivalent to 5 bitcoins. A word of caution, leveraging can definitely yield substantial profit but can also result in substantial losses as futures are high risk high reward instruments. But if it is used properly, bitcoin futures can be a great trading strategy in your portfolio as illustrated in a quick overview of how to trade CBOE bitcoin futures from the CNBC's Fast Money team. This can be used by institutional or individual investors to hedge against an existing long position.

On the CBOE Futures Exchange, the active front month will expire in January 18, 2018. The spread (bid-ask price) is fairly wide at $90 and will fluctuate to over $200+ at times. This will tighten as trading volume increases over time. Because of the fairly wide price spread, always use limit order when placing trades. As an illustration, let's say I'm looking to enter a limit order to buy 1 future contract at $18000. My margin requirement is actually about 60%, see snapshot below. With this trade, my order will get fill if bitcoin drops to $18000 or lower overnight and I'm looking for it to go higher than $18000 within the contract expiration period, which is 31 days in the future. Between the expiration period, you can choose to close your contract by selling that 1 contract and take a delta profit, if the bitcoin price is above your initial agreed contract price of $18000 or take a loss if it's below $18000.

Invest wisely and good luck!

About Mr.848days

Mr.848days is an engineer for a leading American technology company. In his spare time, he enjoys weight training, stock market investing and option trading, traveling, and spending quality time with his beautiful family. ​​